NCLT Kochi Declines Temple Trust's Bid For Possession Of Property Leased To Attukal Devi Institute During CIRP

The National Company Law Tribunal (NCLT) at Kochi has recently refused to direct the Resolution Professional to hand over possession of a hospital property leased by Attukal Bhagavathy Temple Trust to Attukal Devi Institute of Medical Sciences Ltd., observing that such a direction could not be issued during the subsistence of the Corporate Insolvency Resolution Process (CIRP) and moratorium.

The tribunal observed that such a direction could not be issued while the Corporate Insolvency Resolution Process (CIRP) and moratorium remained in force.

A bench of Judicial Member Vinay Goel was hearing an application filed by the Attukal Bhagavathy Temple Trust and the deity Attukal Bhagavathy. The applicants sought a declaration that land and a hospital building leased to Attukal Devi Institute of Medical Sciences Ltd. could not form part of the corporate debtor's CIRP assets. They also sought a direction to the Resolution Professional to hand over vacant possession of the property.

The tribunal observed,

“Therefore, at this stage, no direction can be issued to hand over vacant possession of the Schedule Property during the subsistence of the moratorium and the Corporate Insolvency Resolution Process period.”

The dispute concerns 112.5 cents of land and a three-storeyed hospital building in Thiruvananthapuram. According to the trust, the property was leased to the company under a rental agreement executed in October 2008. The lease was for a period of 15 years and expired in September 2023.

The trust contended that the company had defaulted in payment of rent over several years. It submitted that multiple proceedings concerning rent arrears and eviction had been initiated before the Rent Control Court.

According to the applicants, the lease had expired before commencement of the CIRP and was never renewed. They argued that the property remained a third-party asset belonging exclusively to the trust. It therefore could not be treated as an asset of the corporate debtor for the purposes of the CIRP.

The Resolution Professional opposed the application. It was submitted that the corporate debtor continued to occupy the premises and operate a hospital from the property. The Resolution Professional also argued that the company remained in possession as a statutory tenant under the Kerala Buildings (Lease and Rent Control) Act, 1965.

The tribunal noted that ownership of the property was not in dispute. It also recorded that the Resolution Professional had never treated the property as an owned asset of the corporate debtor.

“there can be no dispute regarding the ownership rights of the Applicants over the property.”

The tribunal, however, found that disputes concerning possession and eviction were already pending before the competent rent control authorities. Orders relating to payment of rent and eviction had been passed at various stages. Those orders were presently under challenge before the appropriate forums.

The tribunal also rejected the applicants' contention that the CIRP had automatically failed because the statutory timeline had expired. Referring to the Supreme Court's decision in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, it observed that extension beyond the prescribed period could be granted in exceptional circumstances. It noted that several litigations remained pending and that the Committee of Creditors (CoC) had already approved a resolution plan.

While considering the request for possession, the tribunal referred to the moratorium provisions under the Insolvency and Bankruptcy Code. It noted that the corporate debtor continued to enjoy interim protection in the pending rent control proceedings. The tribunal also recorded that the conditions regarding payment of monthly rent were being complied with.

The corporate debtor was operating a 50-bed hospital from the premises. The tribunal observed that directing handover of possession at that stage would cause prejudice to the objective of value maximisation and preservation of the corporate debtor as a going concern.

The tribunal also relied on the Supreme Court's decision in Sincere Securities Pvt. Ltd. v. Chandrakant Khemka. It observed that the question of whether possession of leased premises should be retained or relinquished during the CIRP ultimately falls within the commercial wisdom of the CoC.

Noting that the CoC had approved a resolution plan and that the hospital continued to function from the property, the tribunal held that no direction for handover of possession could be issued during the subsistence of the CIRP and moratorium.

The application was accordingly disposed of.